francine: going, going, gone. digging deep. glencore says it will pay out almost $2 billion in dividends after the trading division posted the highest profit in decades. and our house, our rules. more than 60 of theresa may's own lawmakers send a message to the prime minister, pledging their support in return for a hard brexit. ♪ good morning, everyone and welcome to bloomberg

surveillance. i am francine lacqua in london. getting some breaking news out of the euro area. february services pmi falling to a level below what economists had forecast, 56.7, instead of 50 7.6. manufacturing falling below 58.5.sts, at i do not think this will impact the euro-dollar, 1.2316. after the trading session that we had on yields and the huge bond auction that actually went according to plan -- you can see the two-year yield over in the u.s. practically unchanged at 2.25%. then we did see a reversal on european stocks. they were gaining on the back of asian equities and now they are actually down 0.4%. coming up on bloomberg surveillance, emerging markets and trade. then we also talked canada and of course, more market movements

ish blackrock and it budget day. we will bring you with the country's finance minister, gigaba. let's get straight to the bloomberg first word news. under moreesa may is pressure with 62 lawmakers from her own party demanding a quick, clean break from the european union. they want the prime minister do take a harder approach on britain making its own rules after brexit and on the nature of the transition period. meanwhile, jeremy corbyn now says the labour party will campaign to keep the u.k. inside a customs union with the eu, saying it is necessary for trade and to prevent a hard border with ireland. the crisis in latvia's banks has turned into a potential diplomatic incident. they point the finger at russia, saying it could be interfering in the sector. earlier this week, the latvian

central bank governor was released on bail after being detained on suspicion of securing bribes, a charge he denies. his spokesperson said this morning that the governor will not go to the governing council .eeting a london-based lawyer pled guilty to lying to u.s. officials pursuing a legend russian meddling in the 2016 election. he admitted misleading investigators about his contacts with a former associate with the one-time from campaign chairman paul manafort. he is the fourth person to plead guilty and robert mueller's wide-ranging inquiry. president trump has directed the justice department to write regulations banning the use of accessories that allow him semi-automatic rifle to be fired more rapidly. police say the gunman that killed 17 people at a florida high school last week houston style rifle. donald trump a few moments ago i signed a memorandum directing the attorney general to provoke regulations to ban all devices

that are legal weapons into machine guns. -- that turn legal weapons into machine guns. i expect these critical regulations will be finalized very soon. nejra: u.k. lawmakers have published a regulator's report detailing "disgraceful misconduct at the royal bank of scotland's now defunct small business lending unit." the report identified inappropriate treatment of small companies in more than 60% of the cases reviewed. and windfarms produced a record 15% of britain's electricity last year. according to a report published by imperial college london, wind regeneration produced double the output of coal as several storms swept through the u.k., boosting turbine speed. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world.

this is bloomberg. francine: the u.s. treasury optioned $179 billion of notes yesterday, sending yields to levels not seen since 2008. the offering saw a decent demand, considering the market is facing a flood of sales. the longer dated notes will come today and tomorrow with an issuance of more than $250 billion in just three days. could we see the 10-year crack 10%? what is next for treasury? joining us next for the hour, a man he knows a thing or two about central bank thinking. he's the former deputy governor at the bank of canada. jean, thank you for joining us. how do you take the treasury -- first of all, we do not have a lot of data from the markets. this hangs on the success of these bills. jean: good morning.

i think the backdrop here is we are adjusting slowly to a very significant fiscal stimulus that has become clear over the last couple months. in more is reflected treasury issuance and we will see more of that coming. we have seen over the last few weeks, rate just to this picture. this is mostly a real rate story. this is mostly about growth, stimulus coming on the back of that and also, deficits that are larger than we would have expected otherwise. that is starting to factor into the picture. francine: francine: let me bring you over to my chart of the day, which is the 10 year yield. we are currently at 2.87%. is this a trend? we brought this back to the 1980's. you can see that yellow line, starting in the 1980's and then it goes down. what happens from here? jean: we are seeing a movement

upward on rates from extremely low levels, some steepening of the curve. i think this is consistent with a backdrop and what we have been learning about. at the same time, we do not want to lose track of the fact that there is a massive amount of savings globally. the imf forecast is $22 trillion of savings. so, that is no surprise that you see this issuance finding some demands. i think this is an equilibrium force. we will see rent going up, but in a contained fashion. francine: how many times do you see the fed hiking? this is the number of rate hikes on the right, and market volatility took hold over the last couple weeks. that have been slowed a little bit. -- that ebbed and flowed a little bit. jean: with the growth impulse we are getting now, which will become even clearer over the next couple months, i think four reasonable18 is a

position at this stage. we will see the wage data come out, which we will see in a minute. i think we are seeing a slow adjustment. is that the kind of -- the word of the day and what would you interpret it as? twice in january? jean: i think it is opening the door for more and it is kind of, you know, signaling some transition. it inl see how they frame the minutes, but the inflation picture, it is not like it is a massive regime change, but it is evolving in the direction where the picture will be dissipating. francine: should they tolerate higher inflation? around the 2% target? , should we care

that much? jean: if they should --whether or not they will -- francine: that is a different question. aan: 2.5% might actually be desirable thing, but the optics will be tricky for them to manage. 2%, i think itve will respond to that. think that will be a massive problem, but at the same time, i think it will be reacting to inflation being above 2.5%. francine: do you believe that we can call 2018 the end of cheap easy money, or is that a false assumption? jean: we are still in a world where the central bank balance sheet -- the fed is adjusting, but it is very slow, the unwinding of the balance sheet. the ecb and boj are not reducing the balance sheet in2 2018.

there is an evolution in terms of the stimulus we see in the global economy, but i do not think it is a game changer. francine: jean boivin from blackrock stays with us. plenty coming up, including the fed releases the latest minutes tonight. will it upgrade its plan to four hikes this year? and could weakness in the be good news for global trade? this is bloomberg. ♪

francine: market, economics, finance, politics. this is bloomberg surveillance and i am francine lacqua in london. let's get straight to the bloomberg business flash.

nejra: glencore has delivered results with earnings jumping, bolstered by nettles and mining trading. the commodity trader and miner reported record profit and said it will pay $2.9 billion in dividends this year. adjusted earnings before interest and taxes more than but it to $8.55 billion, was below analyst estimates. the senior independent nonexecutive director at glencore. the banking group will invest 3 billion pounds in technology as part of a new three-year strategic plan. they will also buy back up to one billion pounds of its own shares. the bank took a 600 million pound charge. to 20%profit dropped to 700 80 million pounds. orange has posted the first domestic annual revenue growth and eight years and predict it a faster growth and earnings in

2018. the company benefits from rising economic growth and consumer confidence in the home market, adding wireless and broadband to describe at a rapid pace. to keep customers loyal, the former french phone monopoly is also branching out to banking services. apple is planning to purchase kobold directly from minors. it is a key ingredient in factory induced power smart phones and other devices. manufacturers fear there could be a shortage because of the boom in electric vehicles. bp is not worried it will be left holding unusable assets, even though the world is shifting to a cleaner energy future. bob dudley has told bloomberg's manus cranny it will be a slow transition. he does not expect a lot of volatility during that process. >> i think the key is the responsiveness of the shales. there is a shock absorber on the upside and the lower side of the oil process. there is such a response of market in north america. i think in terms of $50 to $65 is the ban we will drift within

over the decade. nejra: that is the bloomberg business flash. francine: now, let's talk about the dollar, the weakness in the currency could prove to be a boon for global trade. oxford economics said the dollar's fomite at 3% to world trade, noting that other witness increases cross-border lending and boosts equities. now, who will be the biggest winners from the dollar's weakness? for more on all of this, we are joined by jean boivin. when you look at first of all, markets, i do not know how much you worry about trade wars, and that would be another incentive for the correction of the market -- dollar weakness means trade is ok and growth is ok. are you confident about the future? jean: i think in the near term and on the horizon, the answer in the near-term i think, what is very constructive at this

stage is how synchronized the global impulses in terms of growth. we are living through the most integrated extension in global history. we have never seen an extension when the world was so integrated . we are seeing the benefit of that now, where we are getting fiscal impulses from the u.s. we think some of it will leak into the rest of the world more than it has in the past through trade and other channels. this is more important than it used to be. in the near-term comes the story is mostly about the strong underpinning and the weaker is a significant impulse of global growth over the next year or so. i think the near-term story is a good one. but to your point, this is all predicated on global trade play ing key roles. so, anything that would come and disrupt this could be pretty significant. one way to put it is, the global financial crisis was a global financial crisis because the

core of the system was being undermined, tested. when we think about the global trade agreement, the similar, core element of the system. a significant threat to that could be received with. more adverse and significant reactions. but near-term, it is pretty constructive. though risks are looming as a result. francine: we will get back to the broader equity market after the selloff, but i want to take you to my chart, which looks at the u.s. five-year yield minus the canadian five-year spread. government bonds in canada have outperformed the u.s. counterparts by the most in seven years. is there too much optimism priced into the canadian curve? jean: i think this is in some ways, not too surprising, given everything that we have seen over the last couple of weeks. we have seen the announcement of big fiscal stimulus, huge fiscal stimulus in the u.s., at the

time when the economy is recovering. that is a key driver. we would expect to see that reflected in the u.s. rates more so than the canadian rates. think that explains a bigger spread. ?ow, is it overdone i think it is logical for the fed now to move more quickly, more adjustment is needed on that front been on the canadian front in the near-term. and overall, i think this is consistent with the widening spread. i think this is good news for canada and to some extent, the canadian dollar eventually in an be not as strong environment like this. it will be well-received by the bank of canada. the question is, when this inflation, which is at 2.2%, famous for the u.s., -- same as for the u.s., how tolerant will they be? francine: jean boivin stays with us.

up next, reading between the lines, we go back to the fed meetings tonight as the central bank clarifies its wording during last month's statement and what could that mean for the hiking path? we go through that and talk about the markets. this is bloomberg. ♪

francine: this is bloomberg surveillance and i am francine lacqua in london. let's get back to the fed and officials added the word "further" twice to the january statement.

with the release of minutes at 7:00 p.m. london time, investors might find out why the central banks pledge twice to make for the gradual adjustments with interest rates, as opposed to gradual adjustments. one possibility for the language is the fomc debated raising rates by more than three moves in 2-01018. what clues will the minutes give about the rate path? we are joined by the head of emerging-market cross market strategy at ubs. and jean boivin is still with us. i am very curious about this. you were the deputy governor of the big of canada. how were they drafted? did you count the words and say, i will say it twice, and that should fool the market into thinking this? jean: yeah, you spend hours, days, going carefully through each word and how it might be interpreted. yeah, you think about -- adding further to gradual is not

random. there is a meeting expected to be conveyed with this. the meaning might not always be the one that is being interpreted by the market. but yeah, this is i think, crafted and calibrated to achieve a goal. francine: a little bit more confusion than the fed was expecting. >> the central bank governor is always thinking about it -- the market agonizes over it for weeks on end. i think there's no doubt the word has been put in purposely, but i think we could be slightly over interpreting it. i think the most interesting part of the statement, of the fed minutes is likely to be what they think about inflation because that is what they sounded more confident on during the previous statement. they have done work to suggest that inflation has two parts, acyclical.l and

if inflation does not move much with the cycle, for instance, with health care, if that picks up, that justifies why they believe further rate increases are necessary. i think the market will slowly move towards pricing four. we're looking at four this year. given the big gap between the dot plot and what the market has seen, they might not price in four. the market is slowly going to move in that direction. i think the content continues to move up and also, 2019 is not fully priced. that is what the market will focus on as well. francine: we were talking about whether the fed should look at 2.3% to 2.4%. if they have a weak dollar policy, this as another layer of stimulus, which means you have financial conditions that are looser than they should be. jean: i do not think they have a weak dollar policy.

i think they have a rating within their well-established policy framework, which is guided by a target. the dollar matters for achieving this target. so, that is taken tinto account. the dollar could potentially add fuel to the inflation picture. it is important to keep in mind that they were communicate in three hikes in 2018, where they were seeing potential downsides to inflation. that downside now has been dissipating. so, i think four hikes becomes more likely. at the same time, i do not know that inflationary pressure will be that important. we think of it as, it is going up, it will be around 2% -- we do not see much pressure to be much higher. i think one of the big questions for us is, what is going to happen to potential in the u.s. economy, the potential growth rate of the u.s. economy is ripe for a potential upgrade at this stage. that also changes the inflation

figure for the fed. francine: is that putting the u.s. in danger of overheating, especially when they have a growing deficit? bhanu: clearly at this point, are well above trend. that debate is not fully in the market as of yet. if you're moving the terminal rate higher, that changes the data quite a lot. the two year, 10 year, and also for the dollar potentially. but to do that, you must be clear signs that the capex is picking up, that it is leading to productivity. these are the two aspects of the u.s. economy that have been quite weak for some time. it is not clear to us that that is happening as of yet. there is an overshoot relative to trend growth right now and by 2020, we might see some give back of this kind of growth because the fiscal stimulus could be temporary. jean: this is the big question,

and i agree, the markets have not caught up with the implication. we are putting out a note this week, trying to squeeze out more on the potential outlook for growth. there is a good case that investment will be key. we have got to see that coming. we have seen some pickup in 2017, but there is another important dynamic. we have been through this very long cycle, the duration of which has been much longer than usual. there's a risk that we have been attribute in more of this permanent growth to a structural force, as opposed to the cyclical swing that was a bit longer. if that is the case, the risks for potential reassessment of growth might be higher. we might be ripe for this. francine: at this kind of moment in the cycle, given where interest rates are, doing you to start thinking about the next downturn and do we need to start

focusing on the right ammunition for handling that downturn, and is it 18 months away? bhanu: you could argue that is one of the things the fed has in mind when it is going for these rate hikes and normalizing as it is, that it wants ammunition. it is quite possible. the risks are certainly increasing with the fed moving at this pace. but you do not have the classic signs of late cycle. late michael has very high inflation and a big pickup and leverage. -- late cycle has very high inflation and a big pickup in leverage. you do not have the classic signs of late cycle. by definition, we will be coming down with potential in late 2019 and 2020, and that is when i think the downturn comes. i do not think we see any signs of a recession. it is not likely to last until 58 or 60. the linda fed is talking 3% to 3.5%. that is not trend growth. we are likely to come down from there. at this point i do not see it as

likely. jean: we measure the next recession in years, not quarters. we are getting more stimulus so we're going to have some payback potentially sooner than we expected, but this is not an imminent concern. francine: just getting breaking news out of the u.k.. the average wiki late earnings test weekly earnings, pretty much as expected at 2.5%. there is a little bit of movement on pound. pretty much in line with estimates. i am not seeing any surprises. i will try and see a breakdown, whether we see increasing sectors as opposed to others. the three-month employment 88,000, but it also got

revised upwards. movement, but something we need to keep a close eye on. theresa may is under renewed pressure for members of her own party to deliver a quick, clean departure from the e.u. conservative mps have challenged her to take a tougher approach, and demanding that parliament have control over domestic laws after brexit. lawmakers insist they back may's leadership. david, welcome to the program. this is another kind of faction of tories that are pre-brexit putting pressure on theresa may. in the press this morning, they were saying this is an ultimatum. how would you quantify it? david: i think just recently we

had duncan smith on this program. he said, it is just this media storm about it, it is just a reset. it is clearly more than that. it is a pressure group of mps putting the pressure on the prime minister with this letter. 62 of them. it is chaired by a prominent pro-brexiteer. 62 is more crucial than the 48. 48 as the number of mps that would need to write a letter to trigger of leadership contest. they were pained to say in the letter, they are not looking to topple her as a prime minister, but she will feel the pressure. tomorrow, mrs. may posts and away day -- hosts and away day and they will hash out their position. we have been feeling that the cabinet is coalescing around

divisions on what they may want to ask the european union. moment, we are not seeing a big reaction in the market. we have always known there were these group of people who want the hard brexit and they will not go so far as to try to bring the government down. we will have to wait and see what the cabinet says. francine: this is like a chess game. the mp's, would it be in their interest to threaten to bring the government down? you have the dup with the 10 crucial votes. david: look at the polls, it is neck in neck with labour. i do not think you will find tories that want to have an election to trigger that sort of renewed political uncertainty. mrs. may has to balance these factions in her party. she has done a pretty decent job at this so far. some of them are brexit -- vocal brexiteers are coming around to her views.

she still has a long way to go. they have to come out with this position in the next few days, and she will make a big speech next week, eating billed as her biggest one since florence, where she will lay out the trade relationship the u.k. wants. francine: are you looking forward to the big speech? we have some data from the jobless claim counts. losing my voice, i am so excited about the speech. between the speech and the data points, what did you look at to decide where to invest? referencing, ire think a lot of it is to be expected. thenow the situation in u.k. in terms of domestic politics, and we know the negotiations will be tricky. there is a lot of positioning. i do not think that is changing the main thematic in terms of

the u.k., and that is one where there is a big structural headwind to the u.k. economy as we face this uncertainty and adjust to a different type of trajectory. in the meantime, we are in a fairly stable situation that allows the bank of england to continue and pursue its normalization policy to some extent. we are watching. ,hen -- we need to see for cues but i would not say it is a big changer. bhanu: the theresa may of lancaster house and theresa may of florence is very different. how this speaks to you is can we get the transitional deal with the e.u., and if we do not get a transitional deal that is good that could impact the probability of the boe. what does that do for business confidence, investment, the

labor market? some of the data has been softening, unlike the rest of europe and the u.s., some of the data in the u.k. has been softening. if you do not get that transitional deal, and there are different opinions, that will mean that business confidence comes down, and the probability of the front end of the boe being repriced as high. francine: i will ask about the labour party. i have been doing research on scotch and this is linked to some of the tariffs that scottish producers have with india. can brexit be a game changer for any of these trade agreements with the emerging markets? could they benefit, or would it be more local industries that and if it from trade barriers being taken down? bhanu: i think for some emerging markets a good increase trade. that is one of the points that the 62 mps made to theresa may. they want negotiations with some of these trading partners.

yes, you could see trading partners see a pickup in trade, places in asia in particular, but there are idiosyncratic dynamics as well. somethinge india want in return in terms of freedom of movement, and that is something theresa may needs to yield to. it is not clear there would be an instantaneous pickup. francine: talk to me about the labour party and jeremy corbyn, he is not exactly pro-europe but he wants to stay in the customs union. >> he used to be much more of a eurosceptic and now they are talking about moving to his position were -- what does that mean? is notat mean britain free to negotiate trade deals with the emerging markets because that is one of the conditions of being in the customs union that is negotiated as a whole? many in the tory party, boris

johnson himself has said we might as well not leave at all if we are not free to negotiate trade deals with the rest of the world. this is a key sticking point, and labour are are going to say we want to be in a post -- customs union. it is a clear choice between the two parties. labour were is sitting on the fence and they are inching in that direction. it will be interesting to see how that will affect the opinion polls. francine: a u.k. quirk, talking about buses, we have buses going around the country trying to rally support for brexit and remaining. david: there is a new campaign coming out for remain. it was the iconic image from the referendum, the big red bus committing 350 million pounds a week. authorities say

that was misleading. remainders are coming out with their own campaign. not sure what it is going to say, but they are putting a lot of money to try to change public opinion. the public opinion has not really shifted throughout this debate. we understand more about what brexit means and the impact it might have, and we are seeing some of the economic data showing the impact. polls show if we ran this road again we would probably get the same results, or it would be a tossup. this campaign is around trying to change the conversation and shift things. there is a possibility we may get another vote, whether it is on the final deal or on the referendum, and the remain side wants an advantage. francine: david merritt, london's bloomberg bureau chief. mixed messages, glencore's

earnings came in below estimates. we talk the future of the minor and cobalt. this is bloomberg. ♪

francine: good morning, everyone. i am francine lacqua in london. let's talk about glencore, reported the highest trading profit since 2008 and boosted dividends. joining us now for more on the results is will kennedy, our managing editor for energy and commodities. he joins us more for following the earnings on glencore. they have a huge trading arm and they also have the mining bid.

trading was really good, mining a little bit less so. will: a little bit less, but pretty good. it is benefiting from the run-up in copper prices. the trading arm was a standout. it made more than $3 billion of the first time since the global financial crisis. it is a company that has turned around massively from 2015, where they had the near existential crisis and firing on all cylinders. francine: glencore has been through a lot, and the share price reflects that. what is next? will they go for more acquisitions or focus on the trading? will: they increase dividends to shareholders or than expected, and that is a common theme -- more than expected, and that is a common theme. they are not paying out quite as much as other mining companies, and there is financial headwinds for deals. a desire to do deals in the

agricultural space, that is bound at almost $10 billion at the bottom of the range so they have a headwind. francine: what about dividends? almost $3 gave billion back to shareholders this year and they said if they do not do a deal, there is 20th potential to make those returns higher. course, peter nonexecutiveenior director at glencore. glencore is symptomatic, or a lot of these miners are symptomatic of the emerging markets. is it a good bellwether, strength in emerging markets? bhanu: i think it is. through the first part of this year, you have seen metals and mining being the sector of the market that has outperformed significantly in e.m. and developed markets.

i think china is slowly and surely slowing down, so some parts of the commodity complex will suffer. throughout this entire volatility in the equity market, steel and iron or prices have done nothing, largely because the market believes on the supply side in china it is likely to proceed at pace. , you will2 this year see a visible slowdown in demand week's housing sales and land sales are moving in that direction. particular ies in think are in harms way. copper prices, that is the kind of demand china is moving towards. electricity grid, electric vehicles are very intense in copper prices, and copper is in a better position. copper, the demand and supply that existed about 12 months back does not exist at the same level. if you look at industrial metals

, i am not sure i would be taking an aggressive bet to go long from here. point, youn that came on last time talking about driverless car's so we built a whole 10 minute block on that. --l kennedy, john bolton 700 million euros would not be enough for barcelona to sell their stock higher. we talk driverless cars, apple, and cobalt, next. this is bloomberg. ♪

finance, economics, and politics, this is bloomberg "surveillance." let's talk about business and sports. barcelona football club says there is not enough money in the world to buy star player leo messi. they spoke exclusively to bloomberg. >> it is the best play of the world. >> he is the best player in the world, 200 million in value, 300 million, higher? >> last june, we renewed his

contract and we put a clause of 300 million years last november, we changed it. it to 700 million euros. >> when you are the president of the club, a balancing act, as somebody came in to offer you 700 billion euros, you would not solely a messy? no.now, -- >> even if it is the future of the club? >> we want to have good football. we practice this unique way of football. our leader. leo messi does not want to leave barcelona. he likes the city. he came originally when he was 12 years old. players ase as many

possible, but if he does not want to leave, he will stay forever. francine: that was our exclusive interview with the barcelona football club president. apple is in talks to buy cobalt wreck we from miners for the first time. they are seeking to make sure they have enough of the metal amid fears of a shortage. cobalt prices have more than tripled in the past 18 months. what does this mean for emerging markets and commodities? us, jean boivin and u.any he said one of the most common mistakes is that people think it is because of the value of emerging markets, but a lot of these equities or stocks are driven by chip makers,

components that will be used in driverless cars. how much can that grow? bhanu: i think there is room for that to grow. as the driverless revolution picks up, as the electric vehicle revolution picks up you will clearly see semiconductor demand remaining robust for the next few years. the smartphone supply chain the memory part of the semiconductor, that is likely to come down, but broadly semiconductors will do well. three years hence, will we be sitting on an excess supply of semiconductors and electric vehicles? is a possibility so i'm not sure i subscribe to the super cycle piece. is very strong right now, and i think that is likely to remain quite strong for the .ext two to four years the tech cycle is really what has driven the e.m. boom. it was by itself responsible for 55% of the overall returns in msci.

it has been a great macro story, but the micro was the lead actor. francine: how does it change the world, in your world of market research and economics, if you do not know when driverless car's will be introduced, if you do not know what our society will look like, how difficult is it to forecast longer-term? jean: the future of the car itself is a very significant trend that we are paying attention to, we have written about, and it could be a game changer. this is very important. a story that is happening, which i'm no expert on, but we have just touched on, and it is difficult to disentangle that story from a broader em story happening. it is the tech sector that has been a big driver but the global backdrop has also been very supportive. i think both together, are supporting commodities and the story we have been talking about. i think no matter whether the

micro or macro is most important, that has some room to continue. i think china, as we touched on before, essential to the story at the macro level and in terms of promoting these kinds of shifts to electric cars and so on, but it is also a big driver of the macro story. we see some slowdown in china, and i think just you -- just a look back, it is a slowdown that is contained. francine: so what kind of level? this is gdp? jean: we are moving slowly down below 6.5%. it is a contained slow down, but that said, january surprised on the upside compared to what we expected, so it is a contained slowdown. ,hile china is slowing down when you look at the rest of em, our work suggests that the importance of dm to the rest of

em is pretty significant as well . the kind of upside we are seeing in dm is more than the slowdown in china. the support for commodities overall in the macro story, there is support in the near term. francine: do you agree? bhanu: yes. i think the macro and micro intersected last year. this year, the property market will slow down so the macro backdrop will be less supportive, particularly with the commodity complex. hasrest of the em complex surprisingly not shown up with the credit impulse, the investment upturn and the ip upturn as you would have seen statistically was dm improvement. there have been lags, but longer than typical. francine: what does that mean for the future? bhanu: within em, the haves and have-nots, the tech countries of

taiwan, korea, china, yes, you go through some wobbles but medium-term these places will -- ironically, this is not the emerging part of emerging markets -- but they are in harms way in the medium-term. growth is picking up in a major way. bhanu and jean. draft textys in a that it is in broad alignment with bu on that transition period. i think that would be pound positive. ♪

francine: going, going, gone.

the u.s. treasury sells $179 billion in a debt option. this is ahead of the fed minutes. more than 60 of theresa may's own lawmakers send a message to the prime minister, sending their support in return for a hard brexit. pressure builds. robert mueller secures another guilty plea. -- thes acknowledges white house acknowledges russia meddled in the 2016 election. this is bloomberg surveillance and i am francine lacqua in london. tom keene is in new york. we did have u.k. wage data 25 minutes ago. it has picked up, but this is because of more jobs being filled by fewer nationals. tom: yeah, the dynamic there an dof course, inflation elevated a little bit. you are hiding the main story of the day. forget the markets. francine, are you wearing

richard quinn this morning? francine: i should, shouldn't i? i went to quite a few fashion shows. i missed the one where her majesty the queen showed up. just my luck. my had never seen anything like it. twitter was alight with it. that is her majesty queen surrounded by the british fashion council. tom: congratulations to mr. quinn for that. we have been talking to vanessa freedman of the new york times, web the size milan among these different cities trying to emphasize fashion. but how do you compete with elizabeth the second at your fashion show? francine: you cannot compete. are going to have to put more spotlight on your local talent? let's get to the bloomberg first

word news. area economyuro hit a speed bump on the way to faster growth. the purchasing manager's in from january.fell british prime minister theresa may is feeling the heat over brexit from her own party. 62 conservative party lawmakers are demanding a quick, clean break from the european union, challenging may to take a harder approach on two issues, the nature of the transition period businesses want and how far british rules should move away from those of the eu. first president trump's action involving gun control since the florida school shooting. he wrote regulation banning s thatled bump stock allow semi-automatic rifles to be fired rapidly. time, thee first

white house has acknowledged that russia tried to interfere during the 2016 election, but sarah huckabee sanders says they had no impact on the result. president trump has been criticized for not speaking out against russia after last week's indictment. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i am taylor riggs. this is bloomberg. tom: let's look at the data quickly here, a quieter day in the markets. that's good to see after the last couple weeks. 58 right now.- not much else going on, a weaker euro fractionally. 20.90.x, back to ounce.ed gold, 1331 an francine: european stocks, tom,

are retreating this wednesday. they were getting a little bit on the back of asian gains, but traders are racing for a busy second half of the week. treasuries are flat. the dollar is extending gains. and of course, before the release of the minutes from the last fed meeting. tom: our chart of the year, which we will feature during the 6:00 hour, gdp in america. we'll get it out on twitter. this is an important chart for television and radio. what we saw in the 1980's and 1990's was a boy into moving average of gdp growth, down to 3% in 2006. and it just has not happened. it has been a subpar gdp. president trump wants to get vel, and wes 2% le will have to see if we can do that on a smooth basis. francine: this is a chart that

our radio listeners can ejoy. it is a very simple 10 year u.s. yield. 980 upe it in range from 1 until a couple weeks ago. the u.s. treasury on tuesday selling $179 billion in securities. levelsvel rising to unseen since 2008. what does this mean for 10 year yields? that is what we saw yesterday, the notes being sold off. let's get more to our guest for what that means for the future. thank you for joining us. we saw those dead yields you know, going through the roof, we saw demand picking up. overall, what does that mean for the treasury 10 year? >> in the short-term, probably still a bit cautious. if we get to 3%, i do not think we will be too surprised.

we need a longer-term perspective. do you think inflation levels can rise much further? probably not. you have concerns about the increase in issuance because of the budget deficit and all sitting that was global demand from treasuries, be it from for us, yields are moving lower here, as opposed to higher. francine: what does this mean for rate hikes from the fed? further, the word of the hour. what does that mean? daniel: we are expecting four this year. we were expecting three this year, but when you add the tax cuts, and this goes back to the chart we showed you about u.s. gdp, the u.s. cannot grow at 3% without generating too inflation. the fed sees that and will raise rates to make sure that does not happen. tom: do we see that inflation

yet? had numbers for payrolls, even with the jump that we did see, it is still well below what the taylor rule would tell you, meaning unemployment rules and wage gains. within the economy, you do and you don't. if you take the cpi figure we had last week on a three-month basis, the annualized inflation rate for core cpi was 2.9%. so, we are already well above target. it is moving up. the issue for the markets, for fixed income and equities is not so much inflation rising. we want that. it's the fear that we will accelerate and go above 3%. we think the likelihood of that is pretty lowl tom: the history of acceleration a price change has been sparse going back to the 1960's. we had mr. heller back in the 1960's and all that, but we have

not seen that in 20 to 30 years. still: the germans are traumatized. i do not know if we are traumatized i the 1970's, but it is difficult looking at the fundamentals to see that happen. francine: if inflation goes up, should we be traumatized by inflation? lookin europe, can we through inflation at 2.5%, or should we stick to 2%? daniel: slightly different targets with the fed and europe. if the fed really believes that they want 2% on average, that means there should be some metric radware inflation is. we have been below 2% for a long time, and we should have it above 2%. we have not much further to go. we wanted more inflation, we are getting it. this caused a bit of a s hock in

the equity markets. so it is good for equities. francine: let me bring you to my charge, and this is the spread between five-year and a 30 year treasury's. -- 30 year treasuries. daniel: things are different this time. if we look at what has been happening with this spread, people concerned about the fault in the spread, the decline, wondering if it signals a depression. it is not the case this time because we have the central banks sitting on the long end of the curve. but alle has flattened, it means is central banks are big players in the market and will be for a while. tom: daniel morris, thank you for being with us during this hour. much more coming up. speaking of economics, michael minneapolis.ny appl

somebody changes at the federal reserve system. michael mckee with neel kashkari on chairman powell. stay with us from london, from new york this morning. this is bloomberg. ♪

francine: this is bloomberg surveillance and i am taylor riggs. the bloomberg business flash. in the u.k., lloyds says it will invest $2.5 billion in technology and the biggest mortgage lender will buy back $1.5 million of its own shares. fourth-quarter profits fell 20%. glencore is reporting record annual profit thanks to the

marketing business and metals and mining trading. they will pay $2.9 million of dividends this year, well above the minimum a pledge. glencore cut net debt by 1/3. for the first time, apple may purchase cobalt directly from miners. it is a key ingredient used in smart phones and other devices. they are concerned there could be a shortage because of the boom of electric vehicles. that's your bloomberg business flash. tom: thank you, taylor. we will speak with our kevin cirilli in our next hour about what is going on in washington, the tweet storms, the president, etc. but right now, we continue with stephanie baker, who has given us great perspective, including mr. manafort. what i want to go to is 1948 and

the advent of a law firm that has 1700 lawyers, 3500 employees. it is ginormous. st indictment,late or whatever it is called -- this nine grand jury indictment, how did this guy get involved with this mess? know,nie: yeah, you nobody saw this coming. i had looked at the work in ukraine because paul manafort had been involved. in his capacity as an advisor to the former ukrainian president. skadden to write a report. the jailing of the former prime minister. this man who was indicted was a key figure working on that

report. hands as that changed part of this, that was very fishy. and i think the special counsel was working on that. that is how he ended up in the fray. tom: what does this signal about this entire investigation? the depth of this seems to be incredible, for temperatures like me. stephanie: the thing i was surprised at from that indictment, that either he discovered that alex van der z waan was lying because paul manafort's partner, rick gates, had told him, or that robert mueller had been carrying out surveillance on encrypted apps, zwaan was van der communicating with rick gates and assumed that nobody could find out about it. i think this shows the depth and of the length that robert

mueller will go to as part of his investigation because nobody thought that a lowly associate from skadden would get caught up in this. francine: it also shows he can secure a conviction against a non-us citizen. result show the kind of of the investigation? stephanie: absolutely. we did not know he had traveled to d.c. to speak with the special counsel's office in november. it looks like he had been caught in a light and had been asked to stay and that is why they were him.to nab he was cooperating, went with his lawyers. and now they have got him. francine: are you surprised with how quickly this happened? first of all, there were no leaks -- this was unexpected. and this means the investigation is advancing, full speed ahead. stephanie: absolutely. report knew this skadden

was being looked at, we knew the justice department had been asked by ukrainian prosecutors who were investigating the misuse of government funds to pay for this report, we did not know that he had been actively interviewing anybody involved. we did not know that this associate have been in touch with rick gates. i think this shows that the tentacles of the mueller investigation are reaching far and wide and it is difficult to predict who comes next. francine: stephanie baker, thank you. we will be back with more. we will talk the deficit and what it means for dollar dynamics. coming up on bloomberg surveillance radio, a conversation with the former reserve bank of india governor. this is bloomberg. ♪

francine: good morning, everyone. tom and francine from london and new york. let's talk about the european central bank, which is holding off on public comment over the bribery allegations against the latvian central bank governors. the governing council expects to today.fed the latvian governor says he is innocent and will not step down. joining us now is paul gordon. stan morris is also still with us.

how tricky this is for the european central bank and how tricky this is for draghi. >> it is a very awkward situation. theecb has stepped in in past quite rapidly to remind the governments that central banks are independent and the governments cannot remove them. the latvian central bank has vics toessuring rimse step down, but there is the backdrop of extreme a serious allegations. and the ecb sibley does not know, we understand, how much detail there is behind that, let alone the veracity of it. it has got to tread cautiously and do its to diligence. it has soy, far remained silent. francine: paul, what are the ramifications of this. we are hearing the central bank could skip the next ecb meeting.

paul: there are problems here for the ecb. it does not appoint the central bank governors. there are 19 countries, which are somewhat far-flung. they have got their own regulatory standards,, to some extent. it also has a national government, which has to enforce the laws in place. they lack some control, but the reputational damage can come back to mario draghi. that is a concern and the other concern is the impact on the latvian financial system. it is a tiny economy, but these things do spillover. ecb,in frankfurt at the you mentioned a tiny economy. do the little economies have the same weight as the big economies, or are there levels of influence at the ecb? >> technically speaking, each governor has one vote. in actuality, because there are

so many policymakers, 25, you can imagine you would get nothing done if everyone had a vote and their say. each month, four of them drop out. that still leaves 21. that still means that in gets one vote,a and so does germany, which is 50 times the size of that economy. in reality, it probably carries more weight than when somebody like rimsevics speaks. tom: do you assume as a watcher in frankfurt that you know who the next country will be that will have the leadership of the ecb? mr. draghi is associated with italy. do you know who the next country is that is due to have the leadership of the ecb? doesn't "due" to always come into play. they are argued.

spain argued that it was due the vice seat when it became available, and it won that argument. germany could argue that it is its turn. that will not necessarily carry weight because national governments decide these matters. there are some concerns about having a german in charge. that is a little way off. francine: when you are looking youuro dynamics, are worried about the strengthened euro, or are you more worried about the notions that it is in time for the german to be in charge, and what that means for the periphery? >> you have not won the battle against low inflation in the eurozone yet, we are at 1% and we need to be at 2%. the market is thinking about

this possibility of a german head of the central bank. that means tighter policy, a quicker wind down of qe and so o n. that also means a stronger euro. that means they are related. francine: we will get back to daniel morris and thank you to paul gordon. we will ask them a little bit more about some of these bond yields, especially moving into german bunds and the spread with italian yields. the conversation with gigaba. ♪

♪ tom: this february 21 in the sunrise of new york city, it is june in new york. extraordinary weather, a record high scheduled for today of 72

degrees. i believe that is 22 degrees celsius. that is extraordinary. francine: it is extraordinary. my google translator from fara fight -- fahrenheit to celsius tells me it's 21.1 and then we have -- telling me it is snowing in london. we are expecting snow in 10 days. we are all over the place, like certain markets. tom: your weather report on "bloomberg surveillance" this morning. taylor: starting in syria, 8 agencies and human rights groups are calling it one of the deadliest attack in the civil war. syrian government airstrikes have killed at least 200 people near damascus. the area has been under control .f rebel forces since 2012 the trump administration says vice president mike pence was ready to meet with north korean officials during his visit to the winter olympics, but they backed out.

that would've been the highest level meeting between the u.s. and north korea in more than a decade. -- giving up is access to highly classified materials. times, --to the u.s. the new york times, that led to a struggle with john kelly over who should see some of the nation's secrets. background check has up and completed. at&t lost a round in court over its takeover with time warner. a judge denied the bid under evidence the trump administration may have influenced the government's decision to challenge the deal. at&t suggested president trump's animosity toward a may have been behind the move. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. so much. thank you theresa may is under more pressure with 62 lawmakers from

her own party demanding a quick, clean break from the european union. in a letter organized by the eurosceptic tories group, -- may have been challenged to take a harder approach on issues. transitionof the period they say business is desperately want. david merritt joins us and still with us, daniel morris. thank you so much for sticking around. 62 --ch pressure candies kennedy's eurosceptic lawmakers put? is this kind of, if you don't do this, i take you down, or more like a gentle nudge? >> they are not issuing a leadership challenge, but that number is significant. the number of mps to trigger a leadership -- is only 48. if they wanted to, they could trigger a leadership contest.

they are not going to do that, but they hold a lot of sway and leverage. -- chairman of this group they call themselves the european research group, they are really a pressure group to push for a more harder brexit. the market is not reacting too much this morning with traders saying we know there's a lot of people who want this, but it is significant that so many of them are grouping together with that many people and signing a letter, making it public. she's got her away day at cabinet and they are supposed to hash out what the position is on brexit and this is time to influence that decision. francine: there seems to be so much political infighting within the tories. is this an opportunity for the labour party to come in and say, we are the adults in the room? david: the labour party are not united on this issue either. very different opinions about what sort of brexit we should have. mr. corbyn himself has apparently been on some sort of

journey from being very eurosceptic to being a little bit more in line the softer end of the argument. the labour party still saying they would like a customs union, not the customs union. they are definitely leaning towards that side, but they have a lot of different opinions within their own ranks. francine: what happens next? as we were hearing earlier on -- says every time theresa may gives a big speech, there was florence before that, the cbi, it depends on which constituency she is talking to. david: we've got the next big speech next week. we have the away day from the cabinet, locked in a room until they finally agreed a united position. we think they have been drifting towards some kind of consensus. next week, that will be delivered in this big speech, what kind of future relationship written once -- britain wants for the european union. non-hardliners in

the conservative party, do they have a voice or are they in disarray? david: it's interesting. all of the speeches that have been made have been from the pre-brexit camp. the more remaining side of the cabinet, that is the chancellor, mr. hammond, and the home secretary have been far more on the sidelines. that just goes to show really that the conservative party -- the more vocal wings are on the brexit side. the prime minister herself was a remain her. she voted to -- the european union and she has been very careful not to commit how she would vote if there were a second vote. we are going to have to wait and see what comes out of this cabinet meeting tomorrow. i think you are right. i think we can expect more hard-line measures. we can expect pushback against

the european union's demands for what the transition period is going to look like and a bit more red meat into that brexit wing of her party. i am a distant from the united kingdom. how does the european union respond to this daily soap opera? daniel: soap opera is the word, isn't it? i's interesting the markets think are maybe not responding daily to some of this. tom: agreed. daniel: it seems to be a little bit incremental and people are in the weeds. the european union has their own dishes -- issues to deal with and they may have made it clear they do not want to be sucked into this daily back-and-forth. we have speeches from mr. macron where he barely mentions brexit. the economic data show this. they are in a bit of a sweet spot and their economy and the eurozone. brexit is not really the top of

the agenda. it's not really our biggest problem. we got a good economy, a strong currency, and things are looking rosy for the future. that is the thing they are trying to project. it doesn't mean they have to get sucked into the machinations going on in westminster. francine: we also have news out for -- employment pay picked up in the fourth quarter. what is your take on u.k. equities or guilds on the back of daily negotiations or daily in fight and in some cases weaker than expected ego data? earningf you start with momentum's, it's not necessarily all positive. a lot of that has to do with sector composition of the ftse as opposed to say technology, which you might like more. you don't see much of an upturn. another concern clearly has been the strengthening of sterling

versus the dollar. that makes it more difficult for u.k. exporters. there are still some things weighing on the equity market on top of the fact we saw an uptick in unemployment. there are still economic signals that are not all that positive. francine: this is cable. we brought it back to 1993. does it touch 150 and if it doesn't, is that dollar weakness or pound strength? there, iwere to get think you would have to change the tone we are hearing currently. i think that really has been the narrative that has driven the rally so far. it's just a question of is that the right narrative and how much longer is it going to go? the other thing we need to keep in mind as the bank of england, the expectation they will be raising rates to bring inflation down is supported for the currency. we are not sure that is going to happen. francine: tom and i could use and away day. our they going to be fighting or talking? david: we have been told

multiple times it will be a crunch meeting. it's extraordinary week -- that we are where we are in the government still hasn't spelled out what it sees. in athey all be locked room at checkers tomorrow and not allow the cat in the bag? i don't know, we will have to wait and see. theave seen the signs cabinet is coming together. we have had this very well choreographed series of speeches from boris johnson, liam fox, all pointing the same direction, allied itself with europe in some areas and break away with others. it's a bit of a compromise, but it should mean we get an agreement. tom: david merritt, thank you so much. daniel morris is with us as well. coming up, your morning briefing. if you are captive in your car, there is no better update to the world of investment and economics and all the political news.

"bloomberg daybreak" look for that with karen moskow and bob moon. this is bloomberg. ♪

♪ good morning, everyone. "bloomberg surveillance." and tom keene in new york francine lacqua in london as well. let's look at energy. michelle joins us from -- on energy aspects from asia and the chemistry of energy away from opec, oil, away from the usual themes. we look at cobalt, lithium, chemistry. what's the number one thing we need to know about our addiction to batteries and what seems to be a new addiction to automobiles with larger batteries?

michelle: electric vehicles are here to stay, but -- let's not overstate their impact on oil demand growth. one of the main talking point end of oil's and the demand. even though electric vehicles are making huge gains and sales, it's still a drop compared to regular sort of traditional gasoline powered vehicles. tom: within this, we have seen a prices and cobalt different companies. apple and others trying to corner the market on cobalt. from where you sit as a pro on this, how much do you follow these minerals, part of the periodic table and how much do you follow the geography of these minerals? michal: the trades are going to shift alongside these minerals and we are going to see china and asia tracking more as they develop an entire industry based on the production of the

electric vehicles in the batteries that go with them. we now expand our national resources from looking at flows in the competition for oil and gas to minerals as well. francine: how do we understand china is changing the way we build infrastructure. what we have known about china in the past will change quite rapidly. michal: they are really looking to upgrade their technological capacity. they have been laggards in traditional vehicles and ev's are a way for them to become leaders in this next phase. electric vehicles are about the environment and pollution, but also industrial and localizing the supply chain inside china. francine: what does it mean for oil companies inside china? have we reached peak demand for oil in a lot of these asian economies? michal: i think people like to talk it up, but we are well away from peak demand for oil. -- 500,000 evs is a

big number, but not even 3% of the total car fleet. 2030, it will make a dent in gasoline demand growth, but we are nowhere near displacement. tom: is there a strategic interest to nations of not only the odd chemistry like cobalt, but the end of the other electrical minerals out there. how critical is that strategic interest and how asleep is the developed world? these are old questions of access to resources where developing nations and producer countries now have a ticket to their development, securing greater infrastructure to develop resources, to revenues, and the developed world is taking part both in trying to seek access to those minerals and in helping the development of reduce or countries.

it is an old story, but with a new spin to it, if you will. francine: what is the read across into the world of markets -- does an investor need to prepare now for the future of transport -- electric vehicles, or is it too soon to get on that trend? daniel: you want to differentiate between what -- technologies and more broadly we see this in all types of sectors and it's a question of growth versus size. from a size point of view, oil powered -- gasoline powered, petrol powered cars are the big ones. the growth will be in these disruptive technologies and we are looking to invest in the right ideas. i think it is something people should be looking out here and any kind of consumer sector overall to see where the disruptor technologies will take off. tom: i am making this chart very quickly. this is cobalt. how about log cobalt?

straight up down we go. and theove on cobalt explosion in 2016 up to 80,000 units on the london exchange. why is that? michal: demand. tom: it's just demand. michal: demand for these technologies. yes. francine: we are going to need a bigger answer than that. what am i looking at? if tom had to do a chart which no one ever looks at, give me a crazy smart chart to outdo tom keene in this chart making. are you looking for the number? what do we still need to know about batteries and electric vehicles in china? michal: we need to look at manufacturing hubs. our view is china this year -- there are two stories, one is environment and pollution and new technologies. on the one hand, china tries to stimulate new technologies and make that or he makers, but it runs away because they have issued a huge amount of stimulus

incentives to create new technologies and batteries that has generated a huge amount of fraud. we have carmakers and car production, but financial law. if you try to sum up how many subsidies have been given per car, you would actually see a very low return on investment and that's why the chinese government is trying to phase out those subsidies. daniel: to put it in a broader context of where we are in the economic cycle, commodities tend to do well. it's a much higher degree in cobalt and some specific story, but more broadly seen commodities do well as part of this inflation pick up we are looking for, generally speaking, is a good time for commodities in general. .rancine: thank you so much we will be back with daniel morris of bnp paribas asset management. coming up, conversation with the iea executive director.

look for that interview at 11:20 a.m. in london. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." i am taylor riggs. let's get the bloomberg business flash. foras found a temporary fix an engine problem that led to the ground of almost a dozen of air 323 to the engine maker would replace a new seal with the original one because of durability issues. -- is working on a permanent fix. sprint has gone back to the junk bond market for the first time in three years. the smallest of the 4 leading u.s. wireless carriers spelled -- sold junk bonds. it's a sign the parents have no immediate plans to provide funding for the cash-strapped company. the soccer player that many consider the best in the world is not for sale at any price. bloomberg spoke to the president of barcelona.

>> we have a club we wanted to have -- we like to practice this unique way of futbol we do when we play. -- is our key player. taylor: messi's current contract has an $800 million buyout clause. tom: we need to talk about china and we do that with daniel meidan withichelle us. she has the huge -- michal m eidan with us. when you read about china in mandarin, how does it read different than all the stuff i read in english? michal: when you read the local news, it's all about how great the party is doing and how great the country is doing and ensuring everyone gets on board with that message and it has been a tricky message this winter with the efforts of

curbing coal production, but there hasn't been as much gas. the spin you see and how is the spin in the chinese press -- chinese language, how is that changed in the last two years? all about is environmental protection. it's all about getting blue skies and even this winter where you have had overzealous implementation of local officials pulling out coal-fired furnaces and not installing gas fast enough. people happen been cold and yet they have been saying skies have been blue. the government has had to bring back coal production and imports in order to keep the heating going. overall, the message at least it seems to be still trickling through that we want blue skies and therefore, sacrifices will have to be made to get there. francine: dan, what is your take on china -- take on china? is it neutral this year?

a couple weeks ago looking at 2015 gdp and in certain regions and provinces, it could have been overestimated. daniel: maybe this year compared to last year they are owed -- underestimating the risk. last year was all about china hard lending. perhaps maybe we are now a bit complacent. two things to worry about. one is parallel to what you are talking about in terms of implementations and trying to achieve an objective perhaps too quickly. restrict of financial -- system. they raise interest rates to do that. that's probably a good thing. if they go to the, you can create problems and bankruptcy and -- point, what tom's do you think the west is misunderstanding the most about china? michal: it is on a different trajectory. it's easy to say chinese

exceptionalism, but i think we take thena would course the west has in terms of its banking system and its political system. it has charted its own course. we were worried about china last year, it was a political year. stimulatedugh, they the economy in the real estate sector to have great growth. there was supply-side reform where they try to cut overcapacity and what ended up happening was there was a lot of coal demand that left coal supply and good margins for users. there, have to leave it michal meidan, thank you so much and daniel morris. we continue, this is bloomberg. ♪

♪ tom: this morning amid quiet markets, we consider the economic might of america. william lee of the milken

institute on make export great again. speaking of again, mr. mueller acts. distances himself from all things russia and the president turns to twitter for presidential proclamations. it is rather extraordinary. send a rocket into air, a payload into orbit, and do so with a previously launched booster. wonderful technology. does he once again this is "bloomberg surveillance" live from our world headquarters in new york. that haveories is it written a declaration of independence or proxy to the prime minister? francine: kind of. they say it's a letter, but they want a softer brexit and they say this is a sickly tantamount to a declaration of independence

, a ransom to the prime minister. on spacex, i cannot wait to see it live so you can follow it on various media. what is important, is this observation satellite has been finance by the spanish military. with -- this is basically a rocket. falcon nine you see how we are doing space with the middle child? tom: i love that we are doing this and i think it has been under the national radar in america. it is out there, but it's not like cape canaveral and the astronauts and yet the technology involved here is extraordinary. that flight scheduled for this morning is about 3 days delayed as they wanted to work on how the satellites are pushed into orbit and how that coupling at the top of the nose cone is recovered. we will do much more on that later this morning. in new york city with our first word news, here is taylor riggs. taylor: the euro area economy hit a speed bump this month on

the way to faster growth. according to ihs markets, the purchasing managers index fell since january. british prime minister theresa may is feeling the heat over brexit from her own party. 62 conservative party lawmakers are demanding a clean break from the european union. they have challenged may to take a harder approach on two issues, the nature of the transition here. and how far british rule should move away from those of the e.u. it is president trump's first action involving gun control since the florida school shooting. he told the justice department to write regulations banning so-called bump stocks that allow semi-automatic rifles to be fired more rapidly. the white house will not rule out the chance the president may roll back restrictions on weapons like the one used in

florida. -- russia tried to interfere in the 2016 election. sarah sanders says it's clear russia had no impact on the result and the trump campaign did not collude with the russians pray to president trump has been criticized for not speaking out against russia after last week's indictment. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: to the data very quickly. a second day in the -- in a row relative quiet versus what we have seen futures. euro under a 124 level. the vix, 20.77 in a little bit showing some of the enthusiasm over the last 48 hours. 30 year bond at the bottom, 3.15%. that should be red on the screen, that's lower by one basis point. that's about three basis points below the 3.18% level which would mark higher yields.

francine? francine: this is what i am looking at for the dollar extending its rally. benchmark treasury before another round of u.s. debt sales and before the release of minutes on the related fed meeting. stocks dropping after worse than expected data dented the region's growth story. this is my chart of the day, simple spread between five-year and 30 year yields. we will push it out on radio for regular listeners. this goes back to the curb and what bond options can do to that. tom: very good. this is my chart of the year from last year and simply, we are going to show this chart through the entire hour with william lee of the milken institute. this is american economic growth back 20 plus years and we forget where we have come from, which is a moving average of real gdp 4.5% -- call it morning in america, and we come down to the

3% level in 2006 and president trump would like to get back here. this is a good theme within the -- of the markets to speak with william lee of. at theadvises mr. milken milken institute. wonderful to catch up with you again. every interview we do says we need to make exports great again. how does the united states do that? william: the only way to get exports up again is to make us a more productive economy. one of the reasons that growth has been so low is multifactor productivity has been almost near zero for the last 10 years and one of the mysteries is why has it dropped so much? one of the reasons people have latched onto is the lack of investment in technology and modernizing equipment, including infrastructure and that's exactly what the administration's plan has been to do, shift the basis of

investment toward longer-term investment, more productive investment, and that will make this economy great again. tom: that can be a long-term solution. there.nded very imf-y to citigroup where you had your shingle out for many years. can -- work to make exports great again? bill: i think that is a misreading of the secretary's remarks. we have a balanced payment deficit, that is downward pressure on the dollar and one reading is that, i think they corrected themselves by saying the dollar will strengthen if the u.s. economy becomes stronger and that -- the u.s. economy becomes stronger if we can get more productive. even though i spent 6 years at citi, the short-term drag from the deficit is offset by the huge amount of capital inflows

coming in because of their's -- the rest of the world come all these investors in the world use the you it -- the u.s. economy as the basis for productive, still. is the u.s. overheating and our authorities aware of it and what can they do to stop it from overheating? bill: i am really appalled by the keynesian tint to the analysis i have heard out there. everyone is so afraid the increase in the fiscal path -- package will increase inflation and they keep forgetting econ 101. when you increase investment, that is a dampener on inflation. i have been doing research lately. one of the alternatives to the phillips curve comedy cyclical moving prices -- curve, the cyclical moving in prices. capital expenditure plans against inflation and other disharmonts -- capital expenditure plans is a drag on

inflation. if you look at the economy on a longer-term perspective, the fears that come with the package is the fear we get pushing aggregate demand and not aggregate supply and that is where the controversy is. how much will be the supply response and how much will be the demand response? would be a drag, but if you have weaker dollar that is not a drag on inflation? bill: no, but remember, a depreciation in the exchange rate is pressure. you have to have depreciation on the dollar that's priced in before it becomes inflationary. the first lesson any young economist learns is you look through price level changes. i think that is what my former colleagues at the fed are doing. is the dollar going to be continued to appreciate, probably not and i think that is why the fed and most of the economists are less concerned about that. is curb isact is the

like this. if you get fiscal joy, it moves to the right. that is in the original textbook. how far is that slam to the right going to be the calls tomorrow two years -- to mold -- tumult two years from now, five years from now. bill: consumers are going to get more and that will shift aggregate curve out. the servings rate dropping to 2.4% isst level ever, not sustainable. when you get a jolt of income, are people going to save it or spend it? that is yet to be determined. we see from the latest retail sales numbers, people have not really gone out and end their money. tom: are we going to get two or three quarters in a row of 3% plus gdp? are we going to make america great again? bill: it's going to take a while for investment incentives to kick in and for the incentives to be a dampener on inflation. my research shows three or four

years. tom: very good, william lee with us. thrilled he is with us today. aboutgot lots to talk forward. francine lacqua in london. i am tom keene new york. an important interview today, the dissenter from any apple is, neel kashkari -- minneapolis, neel kashkari. this is bloomberg. ♪

♪ is "bloomberg surveillance." let's get the bloomberg business flash. invest $2.4 billion in technology as part of a three-year strategic plan. the mortgage lender will buy back up to $1.4 billion of its own share. lloyd reported first-quarter

profit missing estimates. -- recorded record profit thanks cash this commodity trader and miner said it will pay dividends this year well above the minimum it pledged. glencore also cut net debt by a third. for the first time, apple may buy supplies of cobalt directly from miners. cobalt is the key ingredient in that are refused to power smartphones and other devices. there is concerned there could be a shortage because of the boom in electric vehicles. apple is seeking cobalt contracts of five years or longer. that is your bloomberg business flash. tom: thanks so much. gun controlt to with kevin's a really front and center in america. no question about that as we have seen the horror in florida. i want to touch upon -- a ponzi zeitgeist -- i want to touch

upon the zeitgeist on twitter. it's an interesting essay from a young hipster. a controversial former police theory linking the fbi russian investigation and the florida school shooting made its way to the president of the twitter account where he shared his observation with 48 million followers, all of this off of russia's rt and breitbart. kevin cirilli joins us from washington. i thought general kelly was supposed to contain the social media of the president. we have seen three or four days of a twitter storm out of the president. how does this end? is russia propaganda. let me repeat that. rt is russia propaganda. , the dig into the policy administration has been critical about the united states having a

lack of response or counterpart -- equivalent to our -- to rt in the international space and there has been talk high the scenes for the united states to develop an alternative to rt. tom: didn't we call that voice of america? kevin: i think voice of america quite frankly is researching, but the administration has quietly, for quite some time -- and the obama administration turned down the opportunity to do this, but the administration has been quietly talking about an equivalent of such to develop. tom: the link is there of all these things russia and this horror in russia is -- florida is important. in the last one of four hours, maybe the needle has been budged on republicans and the national rifle association. excuse me if i don't believe the needle has been moved. kevin: what an embarrassment for the republican-controlled state legislator last night with the

victims watching in the state legislature as they struck down a motion to debate. not even hold a vote on an assault weapons ban, a debate of this issue. what an embarrassment for them. president trump saying yesterday that he is open to banning a bump stock. you mentioned the nra. just pull the ftc file, $50 million the nra spent in the 2016 election, 30 million of which -- $30 million of which went to president trump. ohiois rob portman of going to change his tone based on the money he takes from nra? everyone agrees he is a classy guy, but it seems like the classiness ends with donations from these large lobbyists. senator portman was part of the $20 million the nra put into 6 republican races, including senator rubio, his

state where this happened. after the sandy hook massacre, you have senator to me and -- set up ahin bipartisan legislative proposal on mental health and enforcing the laws on the book. this is sick. this is nonsensical. look at the polls yesterday, this is not a 50-50 issue. the american people want something done. francine: will they get something? there seems to be no change for the moment. kevin: the president saying he is open to a ban of dump stocks. today the president will meet -- bump stocks. today the president will meet with parents and families up victims and calling it a listening session. the democratic call -- party is calling for more stringent gun-control measures. groups have acy

very strong concerns, right -- right sprayed on the issue of mental health and bump stocks, as a journalist, it feels like it's a repeat episode. the las vegas massacre was four months ago. is an important topic we need to discuss more, but i also want to ask about the mueller investigation. we had a plea yesterday. one of the lawyers admitted to lying. what does that tell you about the investigation. how fast it is progressing and that you can go after a non-us citizen. kevin: we noticed this on friday with the dollar investigation calling on 13 individuals from all of this part of what the investigation saying is a narrative to meddle in the 2016 election and returning from the holiday weekend, you have a new

round of indictment charges against those individuals. yesterday's focus was on paul manafort and his apparatus surrounding him, particularly his support for the pro-russia-ukrainian faction and rick gates, his number two guy, paul manafort's right-hand man pleading guilty. what has he going to tell authorities to get some kind of deal? we will have to wait to find out. tom: thank you for your contribution on these many topics today. in washington as well, william lee of the milken institute. you see all of these different back tond they all -- not the resentment, but the reality all americans face of subpar economic growth. we do not have the population growth to get us back to what mr. trump desires. frankly, what all americans desire, a growth of another time and place.

when you look at the drivers of growth and investment in the united states, the fact the participation rate has been dropping like a rock because the agent population -- aging population is dropping out of the labor growth, it will hold down growth by half a percentage point. you can fix it by making the current labor force much more productive and that is the key to investment and productivity change, being able to spur productivity even though it is -- the current labor forces shrinking. tom: we spoke earlier about exports. tell me about consumption and about investment and even government spending. can the domestic economy generate above average real domestic final sales? not too long ago we were worried about secular stagnation. how did we go to excess demand all the sudden? we will have to get off the narrative and get onto a closer narrative to the truth, which is the u.s. economy is doing quite well and over the long horizon,

there is this possibility of offsetting secular stagnation investment and productivity. one of the things we talked about in the past is people seem to be consuming less. job growth in the united states has been mainly in the low-wage sectors and it's not really generating the kind of income we need.rowth retail, hospitality, health care are not productive enough to generate large income growth that is the source of a lot of social tension we see today in the u.s. and around the world. one of the cures of that would be the -- to fix productivity by fixing investment and the tendency for firms to not invest in people. francine: thank you so much, william lee of the milken institute is staying with us. oilng up, a conversation on with the executive director of the iea. this is bloomberg. ♪

♪ "bloomberg surveillance" from london, from new york. a few moments with william lee of the milken institute. if you go to the wikipedia page of the transpacific partnership, there's about seven names for it. is the united states of america reinserted into a discussion of trade with the pacific? bill: i think one of the most important things for us is to try to reshape these

multilateral agreements. there's a lot to be said for the fact the u.s. entered into a trade deal. it's always the large company that comes out with the short end of the stick. tpp and all these multilateral trade deals has been a way to reconcile all differences. i think the new approach the u.s. is trying out -- this experience, can we shape these more multilateral deals in a bilateral way, and that is where the discussions are. tom: what is it mean to you as an international economist that both candidates for president the last time around basically said no to multilateral agreements? bill: i think that shows the failure of multilateral trade deals. they don't work because everybody is unhappy. the new shift toward bilateral is him, given the multilateral framework, can we find a deal where a smaller group of countries can do better among themselves? i think that is part of the new inection in trade

negotiation where more national interest can be done and that is a bilateral deal. with the weakness in dollar, it adds around 3% to global trade. do you agree with those figures? bill: relative price gives you the short-term jolt, but one of the things we learn in econ 101 is you cannot depreciate your wealth to exporting and prosperity. i think one of the things we need to worry about is behind the dollar, behind the appreciation -- depreciation, is it weakness or rising inflation or the growing economy in europe and the rest of the world? i think right now a depreciating dollar reflects the balance between growth a broad and growth here and the growth abroad is winning out in the short-term. we hope our policies switch gears. thisi look at all of dynamics. what do you need from here from secretary tillerson? i understand we have a secretary

of state with a few empty offices. what do you need from the secretary of state to project our trade and economics? secretary clinton did that for president obama. can secretary tillerson do that? bill: i think the emphasis has got to be the u.s. is in the game of trade and part of the global economy. that message has to get out because the initial message coming in was the u.s. was going to shut itself off and become a closed economy. i think that is a misnomer and something the secretary of state, treasury, commerce has got to go out and say the u.s. is still in the game of global trade. tom: you are in the crucible of that. mr. milken represents so much of the u.s. business interests. one of the best practices of california right now and our pacific rim to jumpstart export dynamics. the lessonnk california is learning from the rest of the u.s. is you have got

to get rid of regulations that have been holding back trade and the package of policies we need, not just the tax cut and trade policy, but reshaping regulation so it in center of eyes is firms that invest in -- incentivizes firms. that has been part of the research we have been doing and we have been discussing in california in our next summit, the global bash -- conference at the yen the end of april, beginning of may. first -- is an america bill: america is the global marketplace. the rest of the world will definitely benefit if the u.s. economy is able to reshape its domestic demand so we have a stronger economy. -- global economy first is the same thing. to 3% guess it jets back gdp. let me get the surveillance

hands out. i get the idea we've got a domestic boom coming. you have a confidence the import and export dynamics will allow for export and import's to assist in growth? bill: domestic final purchases was close to 4.25%. is u.s. economy really booming, and that is what is causing people to think that is inflationary. one of the things we need to concern ourselves about his shaping the domestic demand so increases aggregate supply overtime. here. terrific brief maybe we will do some exports in space. really i want to talk about what we are going to see later this morning. this has been off my radar and it really should not be the

case. this is another launch by mr. -- what it spacex amounts to is three satellites ne,s morning up in that co and of they go. i find it remarkable how little play this has gotten nationally versus the nasa missions of decades ago. francine: i am fascinated by this because it does also have implications on the private sector compared to public money. we know that spacex is launching a stock and nine -- a falcon nine today, but that also depends on the weather. this is crucial if you are going to send these kinds of satellites into space. let's switch gears and talk about oil. crude trading a little lower in today's trading session. u.s. stockpiles forecast to have raised.

iea says the group has almost cleared the glut of risks from a rise in shale. let's get to the international petroleum conference in london. the second day here where leaders from the oil and gas industry convene to swap research and have meetings. they i am joined by international energy agency executive director. the iea has seen explosive growth in the united states. is -- has opec created a new crisis for itself? almost 70 years ago we set that's almost seven years ago we said that this was

coming, and we said that -- almost seven years ago we said that this was coming, and we said that in 2017 the united states would be the biggest producer in the world. we forecast they will overtake saudi arabia and russia. economics are there, reserves e.e there, policies of thert we look at the future, we have to think about established producers, but the united states is coming very strongly as a major oil producer and will be the undisputed leader of oil production for many years to come. twohould also distinguish things. top oil producer in top oil exporter are two different

things. remains to top oil exporter of the world for many years to come. reporter: how does the cartel remain in power? do you think they should configure these cuts after the -- they should continue these cuts, extending the deal after 2018? guest: talks have started between opec and non-opec. those higher prices will induce much higher production from the united states and also several other places. reporter: do you think opec

should then exit the deal earlier? guest: it is up to them to make their able decisions, but one the match ishink es, and the second half is reaction to the united states , but also canada and brazil. we are seeing significant non-opec oil coming into the markets. reporter: do you think oil is sustainable above $60 a barrel? guest: there is no problem in terms of the production growth .nd demand numbers oil demand is still growing. i don't see any major difficulties. reporter: the zinc prices would go higher, $70 or higher -- do you think prices would go higher, $70 or higher? guest: i cannot speak to that, but there is a lot of oil to come to the markets, especially

canadaazil and mexico, and middle east countries. we don't have a problem of supply today. reporter: you said earlier the silent shale revolution isn't so silent anymore. could opec benefit from it? is it a friend or foe? guest: in my view, everybody benefits because it improves global energy security. more producers, more diverse suppliers. but many of these countries are not employing -- not importing the shale gas from the united states. importing from the united states, and some european countries, but we should be honest and should also say that there will be a competition between shale oil and conventional oil coming from the middle east and elsewhere. reporter: i want to ask you

about this report that came out yesterday saying only demand -- oil demand will peak in the late 20 30's. do you see oil demand -- the late 2030's. o you see oil demand peaking? the cost of batteries are going down. this, and our view, doesn't mean that the oil demand will peak because the growth of oil demand is coming from trucks, jets, and the petrochemical industry. it is not the cars. therefore the changes in the car industry will definitely slow down the growth of oil, but it can still grow because of trucks, petrochemicals, and jets using a lot of oil. we don't see a peak in the next

two decades to come. i wanted to ask you quickly about the market rebalancing. opec sees the market rebalancing this year. have they tightened enough? do you think we are already balanced? guest: we are always evaluating the markets, but my main worry , i see aew years' time significant challenge for the oil industry. is at oil demand growth 1.3, 1.4 million. are gettingfields tired when they get old, and the production is declining. , investments for new

,ields are almost close to none especially in the traditional producers. putting these three things together, strong oil demand growth, no new investments coming in a significant manner, and the decline in existing fields, we may well see some challenges in the next few years in terms of the oil market. therter: quickly on supply, opec supply may be enough this year, but what about 2019 and 2020? guest: when you look at for five years from now, you may have some supply challenges in terms of supply and demand meeting each other. there is a decline in the existing fields.

reporter: thank you so much for your time. i will send it back to you in new york. that was the international energy agency's executive director. tom: important conversations over the last few days. right now with your briefing on the news, our first word news. his taylor reeves. andrter: eight agencies human rights groups are calling it one of the deadliest attacks war inseven-year long syria. the trump administration says vice president mike pence was ready to meet with north korean officials during his visit to the winterland x, but they backed out. that would have been -- winter olympics, but they backed out. that would have been the biggest meeting between the u.s. and north korea and more than a decade.

according to "the new york times," a struggle with white house chief of staff john kelly and jared kushner about who can see classified documents. a judge denied a bid to uncover evidence the trump administration may have influenced at&t's decision to decline the time warner deal. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. -- taylor riggs this is riggs. this is bloomberg. this may be -- tom: this may be the most important interview of the day for the president of the united states.

he is the ambassador to india, but far more, robert blackwell has done everything and anything are our foreign policy. is it expert on russia. he's done tours of duty with secretary price and president bush the younger. wonderful to have you with us today. what would you tell the president right now when you see a tweet storm and he is folding in information he's cleaned off the air from the russian propaganda source rt? what do you tell the president when you sit down with him? guest: i think you have to get his attention, and i would say that quoting rt as an authoritative source is like franklin delano roosevelt rose" as if that is an authoritative source. this is a president who has

select advisors to be kind. how to the adults in the room change him or change his behavior to a more cogent day-to-day pattern in our diplomacy? robert: that is a mystery, and i don't have an easy answer to that, but i would point out with respect to russia that all three of his principal advisers -- the secretary of state, defense, and national security adviser -- have all agreed with a report my colleague at the council on foreign relations and i have done on russia that russia has interfered in our domestic democratic processes and is seeking to undermine the united states ever where it can around the world. they all agree with that. the single person apparently within the administration who doesn't agree with that is the president of united states. tom: what will be mr. putin's behavior, if you could glean within all of your experience

, how he will react to the bewilderment of america to this? what will mr. putin do this year , 2019, and the election-year? robert: if the president doesn't take bolder measures against russian interference, mr. putin will be emboldened. if the president of the united states does not carry out his constitutional authority to protect the country, then mr. putin will do more and more. francine: ambassador, good morning. do we know if president trump would have won even without the russian meddling in the election? robert: we will never know, is my judgment. the report i mentioned before says that we will never know how much russian interference affected the election. what we do know is they did

everything possible to try to get donald trump elected. francine: where do you think the mueller investigation will end up? how fast will it go? robert: i don't have anything authoritative to say to that. ,he investigation has been good in fact exemplary, and avoiding leaks, so we will see where it goes. we all, of course, are interested in and the connection between the russian government and american individuals. tom: you were the ambassador, digital map from area code 67260 . big, the won kansas part of the nation you represent. how do you speak to the people of kansas and the great midwest about how we cannot the isolationist, how we can't go

tribune"chicago diplomacy? robert: incidentally all of my relatives were for trump, so you are exactly right. the president has to explain to the american people that are international behavior feeds american jobs and national interests, and of course he hasn't done that. tom: like in this president not trust nicholas brady in an office down the hall from secretary tillerson? robert: he seems not to listen to his principal advisers, so it is not pricing he has a listen to outsiders. i just wished -- not surprising he has not listened to outsiders. i just wish he would follow the advice of secretary tillerson and general mcmaster. the reports out of the administration are all consistent with the reports we

gave, and president is ignoring it. tom: we saw mr. modi speak at davos. it was underplayed with the outdoor over mr. trump's visit. we now see india ascendant to compete with china. how should america assist in their development? robert: on the military side, u.s.-india lee terry interaction and cooperation is accelerating -- military interaction and cooperation is accelerating. it is the largest democracy in the world, shares american thees, and is part of effort to deal with the rise of chinese power. tom: ambassador, thank you so much. will.sador black right now, taylor riggs here --h our bloomberg is the bloomberg business flash.

airrter: a grounding of buses. in minnesota, 3m pays $850 million to settle a lawsuit over pollution. after aany was sued former ingredient got into drinking water. it was linked to cancer and other ailments. 3m argued they were no health problems. spacex is set to launch another falcon nine rocket today from california, installing broadband satellites and radar imaging satellites into orbit. had an february 6, spacex successful falcon nine launch. that is your bloomberg business flash.

francine: theresa may is under pressure from lawmakers demanding a clean break from the european union. may has been challenged to take a harder approach on two key issues -- how far british rule should move away from the eu after brexit, and the nature of the transition period they say businesses desperately want. reporter --d by a our reporter. what does this mean for theresa may? she was trying to get everyone on the same page. what is this letter? is it pressure or blackmail? , "we are they say ready to remind you of our continued strong backing," so is it -- so it is support. or is it? it is probably not supportive.

the inside line on this is that it is trying to head off technical things happening inside the brexit negotiations and is about putting down a marker to say thus far and no further. there is a techie explanation for this. to be fair to its authors, that was not intended for publication. or they say it was not intended for publication. however, if you get 62 in peas -- 62 mp's to sign something, the odds are it will be published. tom: if you are -- francine: if you are theresa may, you have to figure out ireland, and you have skeptical tories on the other side. reporter: it is even more obligated than that. the dup are simultaneously pushing for a hard brexit. pity theresa may.

she's got to get a deal with the european union. a lot of this week, the public planned events have been speeches, ministers going to europe, theresa may saying, we are not going away. this is its mad. we don't want to change very much. we are leaving, but we still are going to be nearby. don't worry. at the same time, you have her mp's saying to her, you've got to get a hard brexit. we've got to be able to make our own rules. the dup are very much on that side. then you got the irish and other people saying it is all very well, you say you want to go off and make your own rules. if you do we have a hard border, and that will work. pity -- that won't work. pity theresa may as she meets with her cabinet and trusted -- -- and tries to -- francine: -- figure out how all of this will work.

guest: the single most important issue is how the brexit negotiations will be resolved. the lack of clear goals is a holding back a lot of potential trade and investment. it is hard to deal with when you have one country that needs to make a bilateral deal. tom: bill, you go right to where i wanted to go. how multilateral is europe? i don't buy it for a minute. you have a german government that can't even get its act together on a coalition. how multilateral is brussels? has always been a hope and a prayer that we get convergence and some kind of political harmony to be able to conduct unified economic and political issues and policy. that hasn't happened.

it was a tight dream in 1999 when the euro area was formed. i think it is still a pipe dream. francine: what do we know about the labour party in all of this, rob? mp's are labor massively pro-europe. if left to their own devices they might even take us into the euro. the labor leader is a skeptic,ic, -- euro jeremy corbyn. we do seem to be getting some clarity. yesterday he used to slightly harder language. he said britain has to be in a customs union after brexit. that is not quite what they were saying a month ago. they see the irish border issue as an possible to resolve without a customs union. ,o be honest, a customs union if they can't stay and the

single market, is what his mp's would really like. tom: thank you so much for the briefing. let's do the single best chart here. we are going to put up a chart we start the hour with. that is how important this chart is, economic growth, or the lack thereof. everybody wants to get back to the 1990's and the 1980's and some image of morning in america. how do we do that? bill: one way is to center this -- to incentivize investment. one thing that was there that is not here now is production growth. that is the key. tom: we put that chart on twitter earlier.

lee, if that is the case, don't we need population growth? for the issue of immigration into our need for population growth? do we need more immigrants? is it that simple? bill: you hit it right on the head. we need more immigration of the sort we can train. whether it is from a domestic labor force or foreign labor force, the issue is we need , and firms are not incentivized to train people because they are very short-term now. they only lead to incremental increases and are not going to work on investing in people. is the mostat common misconception about some of the charts that we do? what is one thing that you worry about where the u.s. economy is headed?

bill: the chart that tom just showed is somewhat misleading because we don't have the people to get off that growth. is how dog ingredient we boost productivity? that is all of the that. everyone has their own theory. the investment in intangibles is something that is key to the productivity issue, but no one wants intangibles as long as they have to pay off a lot of debt. tom: dr. lee, thank you so much. a terrific briefing today. we will continue on bloomberg radio with "bloomberg surveillance." please stay with us worldwide. ♪ we use our phones and computers the same way these days.

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wage in the u.k. can't the basket keep up with inflation as -- can't keep up with inflation as theresa may faces parliament. party like it's 2008. two-year yields at their highest level in a decade after a soft u.s. auction. >> welcome to "bloomberg daybreak: americas" i'm david westin here with alix steel. >> we have the selloff in equities. just today the dow closed down by about 1%. s&p futures pretty much down on the session. the euro-dollar down. composite pmiaker coming out of europe, and the pound also getting hit as well. 10 year yield pretty much goes nowhere, standing firm into the five-year auction. crude a little weaker because of that stronger dollar story. dat